Seeing Is Believing

The tale of Enron unreels like an ancient parable -- something out of the Old Testament, perhaps, or maybe a gory Greek tragedy: clever men allowed to rise to impossible heights, and then dashed to the depths for the sin of pride and hubris. Director Alex Gibney knows as much -- he opens his savage dissection of the 2001 energy-company collapse with a shot of the church that stands next to the corporation's glistening, mirrored offices. "Jesus Saves" is written on the church's façade, dwarfed by the Enron building. When men have tried to fashion themselves into gods, the scene seems to point out, divine intervention is the last thing they can expect when they fall.

Based on the 2003 bestseller of the same name by Bethany McLean and Peter Elkind, Enron: The Smartest Guys in the Room is a devilishly entertaining film, tracing the meteoric rise and catastrophic fall of the seventh largest U.S. corporation with meticulous zeal. The company's demise was a financial scandal on an epic scale -- one that relied on the complicity of a huge array of Enron executives, lawyers, financial advisers, banks and perhaps even the White House, the film alleges. The consequences for employees were staggering: 20,000 jobs and two billion dollars in retirement funds and pensions evaporated when Enron went belly-up. Meanwhile, the execs at the top had cashed in their stock options before the company hit bottom -- they now face multi-billion dollar lawsuits from their former employees, many of whom have lost their entire life savings.

Enron does a bang-up job clarifying the imposingly complex schemes and "accounting" behind Enron's spectacular failure. "People perceive [the Enron story] as a story that's about numbers, ... " says McLean in the film, "but in reality it's a story about people."

The film brings those people into sharp relief through interviews with former employees, C-SPAN footage, phone recordings, and, most devastatingly, through internal Enron promotion videos. One such recording -- a comedy skit, no less -- shows former Enron CEO and president Jeffrey Skilling har-har-ing over his new invention, "HFV," or the "hypothetical future value accounting" system. Unfortunately for Enron, the joke was on them. The HFV was nothing other than the company's real-life accounting method -- the mark-to-market system, in which the future profits from deals were recorded the day the agreements were signed. There was little interest afterwards in checking to see if those projected numbers ever matched up with the true earnings. And in nearly every case, they didn't, by millions of dollars.

As the company's accounting system demonstrates, Enron wasn't exactly a reality-based organization. Headed by Skilling, a devotee of The Selfish Gene and a profligate gambler in his youth, the company had an ubermenschian passion for "visionary innovation" and "the newest thinking" and "big ideas." When those big ideas didn't reap big profits, Enron execs devoted their energies to finding shady ways to drum up the funds. They also expended vast amounts of effort towards convincing stock analysts and the general public that Enron could defy economic gravity. The books complied -- through the magic of mark-to-market accounting, the company always posted tremendous gains. At Enron, says one observer in the film, "Perception is the reality." The company seemed to turn the Cartesian declaration of "I think, I am" outwards: I think, therefore it is.

As depicted in Enron, the company's corporate culture was ruthless, a nightmare brew of Ayn Rand and Social Darwinism. Employees were ranked on their work performance by their colleagues on a scale of one to five; a full ten percent of the workforce was required to be slotted in the "five" ranking and fired every year. At the same time the corporation was winnowing the weak from its ranks, Enron was rising high on the puffery of ego and hot air -- the corporation told the survivors that "if we were smart, anything could be accomplished," says Amanda Martin-Brock, a former Enron executive. And so, with the feeling of invincibility particular to those who sail unsinkable ships or tattoo lovers' names onto their bodies, Enron set out to make over the financial world in its own impossible image.